"Global takeovers have totaled $1.29 trillion so far this year, up +23% from the same time last year. That's great news for funds that profit from Wall Street's deal making," says income specialist Amy Calistri.

The editor of The Daily Paycheck explains, "The Gabelli Global Deal Fund (GDL) is a closed-end fund that invests in securities of companies involved in announced mergers, takeovers and leveraged buyouts. And the fund offers a rich 9.0% yield.

"During the recession, smart companies battened down the hatches, cut costs and paid down debt. As a result, their balance sheets are healthy. Overall, $3 trillion of cash is sitting on company balance sheets.

Canadian fertilizer firm Potash Corp of Saskatchewan (POT) is in the middle of a rash of takeover-related news this morning. First, Britain's Sunday Telegraph reports that Potash is working on a break-up plan in hopes of stopping BHP Billiton's (BHP) takeover bid. According to the report, Potash would sell its nitrogen and phosphorous assets, pay a $70 per share dividend, and increase its debt pile.

In addition to the weekend's news, The Globe and Mail reported Friday that Chinese firm Sinochem has approached the National Mineral Development Corporation (NMDC) about a joint bid for Potash. Sinochem is making the pitch for a joint bid because it may believe that an individual bid would be shot down by Canada's political powers.

With the presidential election, we are hearing lots of so-called "parsing." Basically, this involves using code words to score some points.

Well, the same goes for takeovers, especially Microsoft's (Nasdaq: MSFT) fight for Yahoo! (Nasdaq: YHOO). For example, according to a report from the Wall Street Journal (subscription required), Microsoft's CEO, Steve Ballmer, said his company may actually give up its fight.

Hmmm....that's certainly interesting. Looking at the long history of Microsoft, I can't remember the company ever quitting (or at least admitting to it).

True, it sounds like some of the employees at Microsoft are concerned about the deal. But, hey, the company has thousands of employees. When should a major strategic decision be based on compromise and consensus?

Basically, Ballmer is engaging in "word play." That is, he is trying to create some confusion to get some negotiating leverage.

Now, I think there's one thing that's pretty clear: Microsoft isn't going to raise its bid (which is currently $31 per share). After all, without a competing suitor, it doesn't make sense.

Basically, Microsoft is going to continue its pressure. And the next step is likely to be on the hostile side, with the proposal of a slate of board members.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

As an observer of markets, I'm a huge fan of hostile takeovers. Like accounting frauds, activist campaigns and battles with short-sellers, they add some drama and conflict to a world that can sometimes seem a little too clubbish.

Thomson Financial's Richard Peterson told the USA Today that there have been 13 hostile and unsolicited takeover bids so far this year -- double last year and the most hostile bids this early in a year since the 19 in 1991. Hurrah!

You have to admit that watching Take-Two Interactive (NASDAQ: TTWO) and Electronic Arts (NASDAQ: ERTS) trade barbs in the media is a lot more fun than a press releas announcing that two companies are "thrilled" to have combined their businesses after a few weeks of boardroom negotiations. Where's the fun in that?

Matt Krantz writes that there are three factors that should lead to a continued increase in the number of hostile takeovers: beaten down stock prices make target companies more attractive, an increase in the number of 13-D filings shareholder activists pushing for changes at companies, and the difficulty many small/poorly-capitalized companies will likely face in raising capital in a tough debt market.

How can investors capitalize? There's probably no good shortcut for predicting which stocks are about to receive takeover bids -- corporate espionage aside -- but buying undervalued companies with reasonable certainty of future profitability is probably a good place to start. Good companies at good prices are the most likely takeover candidates.

According to the Wall Street Journal [a paid publication], it looks like the Yahoo! (NASDAQ: YHOO) board will reject Microsoft's $31 buyout offer. Basically, the company wants at least $40 (hey, why not?).

So, now the ball's in Microsoft's (NASDAQ: MSFT) court. What to do? There are several options.

Of course, Microsoft can up its bid. But why? After all, who can really compete against Microsoft? In other words, why should Microsoft bid against itself?

The #2 option: go hostile. This means filing a tender offer and waging proxy fight. In other words, shareholders will be able to make up their own minds. And, given that the Yahoo! shareholder base has changed significantly (that is, with lots of money-grubbing hedge funds), I think there will be lots of pressure to get a deal done.

True, the hostile approach may be scary to Yahoo! employees. But, I have to assume they also realize that Microsoft is going to gut headcount anyway.

In fact, I think a hostile approach can actually get to a negotiation -- and perhaps a small boost in the offer.

Something else: speed is important. With the election year, it's not easy to predict who will be in the White House -- and how a new regulatory regime may impact the antitrust implications of a Microsoft-Yahoo! combo.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

With Microsoft Corporation (NASDAQ: MSFT) bidding $44.5 billion for Yahoo, Inc. (NASDAQ: YHOO) one would instantly think that Microsoft is the winner -- and they could be -- in about a year or so... maybe. In the meantime, Google Inc. (NASDAQ: GOOG) will benefit immediately. The deck chairs are being re-arranged and there will be one less player. But before everyone thinks Microsoft is going to walk away the big winner, think again.

The game changer right now is Google. With 76% search engine market share, it will still be 4X the size of Microsoft after the Yahoo transaction is closed. Google has been successfully expanding its presence globally, and not in just the usual countries, but in the Brazils, the Portugals, the Argentina's, the Australias, etc. Seeding these remote, but lucrative locations is done and Google is now reaping the rewards.

Google can now capitalize domestically with its customers and Yahoo's/ Microsoft's customers as well by playing the disruption card. Basically, when a technology company is about to be acquired a lot of potentially negative things can and do happen: employees and customer relationships are disrupted. Google can unequivocally claim to customers that they are indeed "the" priority right now and that smooth media/advertising projects are awaiting their approval. Yahoo/Microsoft aren't sure which players are staying or leaving yet. Customers don't like that!!

While big metals company Rio Tinto (NYSE: RTP) is trying to prevent being taken over by larger rival BHP Billiton (NYSE: BHP), it appears that another bid may be coming from China. According to The International Herald Tribune, "China's biggest steelmaker, Baosteel Group, is considering joining with others in the industry in a bid for mining giant Rio Tinto."

Rio Tinto has been scrambling to show the markets that it is better off alone. It has discussed selling $15 billion in assets. The company has also said that the economies of scale in a BHP deal are much less than the bidding company has indicated.

All of that may be well and good, but the market has actually moved RTP shares down since it rejected the BHP Billiton offer, a sign that traders do not think long-term value is going to be enhanced by the company staying independent.

While the BHP offer is for a stock transaction, it is possible that the bid from Baosteel could have a cash component, money from the Chinese government. And that might change the view of a lot of RTP shareholders.

Douglas A. McIntyre is an editor at 247wallst.com.

Hershey (NYSE: HSY) is recently up $0.51 to $43.01 on renewed & unconfirmed takeover chatter. HSY call option volume of 10,491 contracts compares to put volume of 570 contracts. HSY November option implied volatility of 45 is above its 26-week average of 24 according to Track Data, suggesting traders buying calls for an upside move.

Dean Foods (NYSE: DF) is recently trading up $0.45 to $27.41 on renewed takeover chatter. DF, a leading food & beverage company, reduced 3Q & full-year earnings expectations on 10/2. DF is expected to announce full 3Q EPS on 11/8. DF November 30 calls have traded 108 times on transaction volume of 3,888 contracts above its open interest of 874 contracts. DF November option implied volatility is at 57 according to Track Data, suggesting larger price risk.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

Billionaire Nelson Peltz may have thought he had the inside track to buy Wendy's (NYSE: WEN) since his Triarc Group already owns Arby's.

According to The Wall Street Journal, Mr. Peltz will have competition from a group including Thomas H. Lee Partners LP, Oaktree Capital, and First National Financial. The head of First National once ran the Carl's Jr. and Hardee's chains. And, a third group has come to the table, this one backed by Kelso & Co. and Oak Hill Capital Partners.

Unlike several private equity deals that are falling apart because of tight credit markets, the Wendy's deal looks like it may be done at a nice premium for shareholders. Wall Street anticipates that the company could go for $37 to $41 a share. Wendy's stock is under $34.

Why is this deal different from others? Perhaps because the most visible bidders have a great deal of experience in the fast food business. This may give them more confidence that they will know which parts of the company can be improved to yield better cash flow.

That makes Wendy's shareholders more fortunate than those in other companies being pursued for buy-outs.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Kohlberg Kravis Roberts & Co., reportedly has BCE Inc. (NYSE:BCE), the owner of Bell Canada, in its sights.

A deal for the telecom company would be worth about CAD$30 billion (over USD$25 billion), making it the largest acquisition in Canadian history and one of the largest buyouts ever, according to the Globe and Mail newspaper. KKR is looking for Canadian partners such as the Ontario Teachers' Fund since foreign firms are prohibited from owning more than 46% of a telecom company's voting shares.

Shares of BCE were up 12% pre-market trading. They have dropped about 4% this year.

KKR already has its hands full:

The New York-based buyout firm is part of the $45 billion TXU Corp. (NYSE: TXU) deal, the largest buyout ever. KKR also is among the companies in the hunt for Australian retailer Coles Group Ltd. Last month, it agreed to buy Dollar General Stores Corp. (NYSE: DG).

Apparently, there's no limit to the number of multi-billion acquisitions that KKR can juggle at the same time.

Between private equity and share repurchases by U.S. corporations, the amount of stock outstanding declined by a good amount in 2006. According to a release on Friday by investment strategist and portfolio manager Don Hays of Hays Advisory, there was $400 billion in cash takeovers this year by private equity and corporate mergers and acquisitions. In addition, there was over $600 billion of share repurchases. This adds up to 3% shrinkage in the supply of stock available for purchase.

There could be a lot more of this in 2007, since a whole host of US companies are generating a lot of excess cash that management will need to put to work. Home Depot (NYSE: HD) is the poster-child stock for excess cash generation and share buybacks.

A good investment approach for 2007 might be to find companies like Home Depot with little debt that generates a lot of free cash flow and can afford big stock buy backs. Sooner or later demand will outstrip supply and drive stocks with these characteristics higher.

Analysis provided by Theflyonthewall.com:

Since being mentioned as a potential private equity or merger candidate, Sprint Nextel Corporation (NYSE:S) has rallied 25%.

When Sprint is done bringing in-house all of its affiliates, which should be completed soon, it will become a massive cash flow machine. Sprint's shares were up 15 cents to $20.13 Wednesday at mid-day.

Actually, during the past few quarters, it has become clear that Sprint's management has been running the company for cash generation and margin improvement and not revenue growth. That's another indication that Sprint's board might be evaluating a potential transaction.

In addition, Sprint signed a big deal with the cable companies to provide wireless services to the wireline video and Internet companies this year.

If one of the cable companies does not buy Sprint, look for a huge one-time cash dividend in 2007. Sprint is the only wireless company left that does not have a relation with an old circuit-switched telephone company. The demand for this asset will be big.

Jordan, Edmiston Group (JEGI) is a boutique investment banking firm that focuses on middle-market companies in media and tech. Over the past 20 years the firm has completed over 450 deals. Some of the deals this year include CNET's sell-off of the Computer Shopper Magazine and DoubleClick's purchase of Klipmart.

This week one of JEGI's bankers, Tolman Geffs, gave a presentation to the Online Publishers Association. According to his figures, there has been a big jump in buyouts for dot-com media companies (91 this year). He thinks it is really a way for bigger companies – like the NY Times, Viacom and so on -- to easily get eyeballs. He also thinks Amazon.com is going to get much more aggressive on the M&A front.

So, what are some of his buyout predictions? Here's a look:

Bankrate (Nasdaq: RATE)
YouTube
Gawker
eHarmony

Tom Taulli is the author of various books, including the Complete M&A Handbook and operates InvestorOffering.com.